INDUSTRIAL POLICY MEANS PICKING LOSERS.

It fails every time it's tried, notes Reason's Christian Britschgi.  "Presidential administrations from both parties keep trying to make 'place-based' economic development work."  You could try establishing place-based orange groves in Maine, or sugar bushes in Arizona, and no amount of money printing would develop those activities in those states.

Ah, dear reader, but Dementia Joe is throwing money at information technology.  That should bloom wherever it's planted, right?

On [October 23] the White House announced the selection of 31 regional "technology hubs" that will spur innovation, manufacturing capacity, and employment with the help of generous federal subsidies.

"We're going to invest in critical technologies like biotechnology, critical materials, quantum computing, advanced manufacturing—so the U.S. will lead the world again in innovation across the board," Biden said in a press conference announcing the new initiative, per the Associated Press.

These new hubs, spread across the country, will receive an initial $500 million in federal subsidies—a slice of the $10 billion included in the 2022 CHIPS and Science Act to stimulate investment in high-tech industries.

The hope is to create innovation centers outside the country's existing "superstar" cities like Seattle, Austin, and New York City—where high-tech employment is currently concentrated.

It's possible, isn't it, that those central places emerged for reasons beyond some public money being thrown at them?  Without the right sort of pollinators to go with the growing conditions, there won't be any oranges.  Those central places offer favorable conditions for ideas to have sex, or to appropriate a William Arrowsmith line, you have to provide forests in order to get druids.

For all the president's optimism and federal funding, the history of "place-based" investment policies and economic theory suggest that this latest effort to create dispersed tech hubs will be unsuccessful.

Indeed, the idea of federally subsidized, special investment zones is hardly a new one.

As part of the 2017 Tax Cuts and Jobs Act, Congress created the Opportunity Zones program, which gives investors tax credits for investing in state-designated census tracts with high concentrations of poverty. The idea was to direct investment to areas in desperate need of it.

The problem with such well-intentioned wastes of money is that the correlation of forces in those tracts is conducive to concentrating poverty.  The correlation of forces that creates a Marshallian industrial district is emergent, and public money alone is insufficient pollination.

There's a reason federal subsidies have a difficult time creating innovation centers from scratch. As it turns out, it's easiest to produce innovation in places where there's already a lot of economic activity happening. Firms can draw off a wider pool of highly skilled workers. These workers can flit between more employers, carrying skills and new ideas with them. The close proximity of capital and labor allows more collaboration (planned or spontaneous). A larger market allows for greater specialization and division of labor.

This positive-sum agglomeration explains why so much high-tech industry and innovation is currently concentrated in a few large urban areas. The Biden administration is explicitly going to war with the logic of agglomeration by trying to seed new tech centers in places where they don't exist currently.

Odds are that the White House's tech hubs will be a similar flop to previous efforts at creating "opportunity zones" and "manufacturing hubs" out of nothing. At best, it will likely shift a few more jobs and federal dollars to existing, federally funded research centers.

A few years ago, Richard Florida looked into the identifying features of the most prosperous Marshallian districts.  I fear he mistook symptoms for causes: the music clubs and the bars catering to, shall we say, alternative lifestyles, followed the creatives.  The humans having sex might have met compatible partners trading the ideas that were having sex.  We can be grateful that the current administration isn't subsidizing the clubs and bars, although such an effort would highlight the failure of throwing money at a few rent-seekers in a way more worthy of a Golden Fleece award.